Azizah Fitriani 

Universitas Bina Sehat PPNI

Saiful Anam 

Universitas Bina Sehat PPNI

Avika Nur Aprilia 

Universitas Bina Sehat PPNI

Selyn Wisa Anindya 

Universitas Bina Sehat PPNI

DOI: https://doi.org/10.19184/jeam.v25i1.60067

Keywords:  Foreign Investment, Tax Aggressiveness, Tax Expense, Transfer Pricing

ABTRACT

This study investigates the mediating role of transfer pricing in the relationships between deferred tax expense, foreign investment, and corporate tax aggressiveness among basic materials companies listed on the Indonesia Stock Exchange from 2021 to 2024. Using a causal design, the study selected 84 companies through purposive sampling. Data were obtained from annual reports, financial statements, and publications. The hypotheses were tested using partial least squares structural equation modeling with SmartPLS. The findings show that deferred tax expense does not affect transfer pricing, while foreign investment has a positive and significant effect. Deferred tax expense positively influences tax aggressiveness, whereas foreign investment has no significant effect at the 5 percent level. Transfer pricing positively and significantly affects tax aggressiveness. Mediation analysis confirms that transfer pricing does not mediate the relationship between deferred tax expense and tax aggressiveness. However, it fully mediates the relationship between foreign investment and tax aggressiveness. These results indicate that foreign investment influences tax behavior indirectly through related-party transactions and transfer-pricing practices. The study contributes to the literature by identifying transfer pricing as a mechanism linking foreign ownership to corporate tax strategies. It recommends stronger supervision of intercompany transactions, financing, royalties, management fees, and arm’s length compliance.

Keywords:  Foreign Investment, Tax Aggressiveness, Tax Expense, Transfer Pricing

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